u.s. stocks rise - bernanke talks

U.S. Stocks Rise as Bernanke Remarks Trump China Rate Increase
April 27 (Bloomberg) --

U.S. stocks rose for a second day after Federal Reserve Chairman Ben S. Bernanke signaled the central bank may soon break its streak of 15 consecutive interest-rate increases.

The prospect that the Fed may pause enabled the market to bounce back from initial losses, triggered by China's decision to lift its benchmark rate unexpectedly.

FirstEnergy Corp. and Bank of America Corp. led gains in utilities and financial companies, among the most sensitive to borrowing costs, after Bernanke testified to Congress that the Fed may ``decide to take no action at one or more meetings.''

``Few people thought that he would be that explicit,'' said Frederic Di-ckson, chief market strategist at D.A. Davidson & Co. in Great Falls, Montana, which manages $16 billion. ``We're getting closer to the end of the Fed interest-rate hikes.''

The Standard & Poor's 500 Index added 4.31, or 0.3 percent, to 1309.72, just 0.2 percent from a five-year high. The Dow Jones Industrial Average advanced 28.02, or 0.3 percent, to 11,382.51, a six-year high.

The Nasdaq Composite Index added 11.32, or 0.5 percent, to 2344.95, helped by shares of Intel Corp. after the chipmaker pledged to slash costs.

Trading on the New York Stock Exchange was the second busiest this year, as 2.08 billion shares changed hands. About the same number of stocks rose and fell on the NYSE.

Microsoft Corp.'s earnings report released after the close pointed to a lower open for the market tomorrow as the world's largest software maker gave an annual earnings forecast that missed some Wall Street estimates.

Bernanke Testimony

In his second appearance before Congress as Fed chairman, Bernanke suggested to the Joint Economic Committee that the central bank may pause its rate increases and called the outlook for inflation ``reasonably favorable.''

``Once the Fed gets out of the way, the market will rally,'' said Rick Campagna, who helps manage $4.5 billion at Provident Investment Counsel in Pasadena, California.

The market opened lower after the People's Bank of China said the country's one-year lending rate will increase to 5.85 percent from 5.58 percent, effective tomorrow. The action may slow the world's fastest-growing major economy, hurting demand for commodities and construction materials.

A gauge of utilities jumped 1.3 percent as Treasury yields declined. Lower bond yields make the utilities group's dividend payouts more attractive. The utilities measure has a 3.6 percent dividend yield, twice the S&P 500's yield of 1.8 percent.

FirstEnergy, owner of electric utilities in Ohio, Pennsylvania and New Jersey, gained $1.45 to $50.89. Exelon Corp., the No. 1 U.S. utility owner by market value, climbed 75 cents to $54.16. Duke Energy Corp. advanced 41 cents to $28.87.

Record High

The S&P 500 Financials Index jumped 1.4 percent to a record. Stable or lower interest rates increase the value of bonds owned by banks, brokers and insurers, and boost demand for mortgages and loans.

Bank of America, the No. 2 U.S. bank, rose $1.33 to $49.04. American Express Co., the No. 4 U.S. credit-card issuer, gained $1.80, or 3.5 percent, to $53.70 for the best performance in the Dow industrials. JPMorgan Chase & Co., the third-biggest U.S. bank, added $1.29 to $43.95.

Yields on U.S. 10-year Treasury notes fell 8 basis points, or 0.08 percentage point, to 4.90 percent, according to Cantor Fitzgerald LP. Interest-rate futures showed traders are still certain the rate will rise another quarter point at the Fed's May 10 meeting. The odds of an increase to 5.25 percent at the June meeting fell to 36 percent from 64 percent.

GDP Tomorrow

A Labor Department report today helped ease inflation concern by showing first-time claims for unemployment benefits in the U.S. rose last week by 11,000 to 315,000. Economists expected 305,000, according to a Bloomberg News survey.

The economy expanded in the first quarter at an annual pace of 4.9 percent, the fastest in more than two years, economists expect the government to say tomorrow.

Intel, the No. 1 maker of computer chips, gained 59 cents to $20.08. Chief Executive Officer Paul Otellini said the company will cut costs within 90 days in the biggest review of operations in two decades, as it tries to cope with slowing computer demand and a slide in market share.

Microsoft slid $1.66, or 6.1 percent, to $25.59 and traded as low as $25.54 in extended trading. Microsoft said profit will total $1.36 to $1.41 in the fiscal year beginning July 1 on sales of $49.5 billion to $50.5 billion. Goldman, Sachs & Co.'s Rick Sherlund expected sales of $50.2 billion and profit of $1.57 a share for the year.

Alcoa, Commodities

Alcoa Inc., the world's No. 1 aluminum producer, retreated $1.56, or 4.5 percent, to $33.40 for the steepest loss in the Dow average on the China announcement. American depositary receipts of BHP Billiton Ltd., the world's largest miner, slumped $1.56 to $44.36. China is the biggest consumer of copper and steel.

Phelps Dodge Corp., the world's third-biggest copper producer, dropped $3.73 to $81.86. The company said first- quarter net income dropped 14 percent on wrong-way bets on metal prices. It forecast second-quarter profit, including losses on hedges, of as much as $2.40 a share. The projection trails the average estimate in a Thomson survey.

Copper, which has doubled in the past year, dropped as much as 3.6 percent in London. Zinc tumbled up to 7.3 percent, its biggest decline since February. Gold and silver had their first declines in three days.

Boeing Co., the No. 2 commercial aircraft maker that aims to sell 120 planes in China this year, lost 81 cents to $84.10.

``The main fear is that if China starts to slow down it's going to really hurt our multinational companies that are exporting to them,'' said David Straus, who helps manage $206 million at Johnston Lemon Inc. in Washington.

Exxon

Oil fell for a fourth day, sliding 1.3 percent to $70.97 a barrel in New York on the China rate increase and speculation refineries are operating fast enough to replenish U.S. gasoline supplies before peak summer demand.

Exxon Mobil Corp., the world's largest publicly traded oil company, slid 68 cents to $62.42. The company said first-quarter profit was $1.37 a share on revenue of $89 billion. Exxon was expected to earn $1.47 a share, according to a Thomson survey.

Exxon's earnings were the exception to a trend of better- than-expected profits. About 71 percent of S&P 500 companies that reported first-quarter earnings have beaten analyst estimates, more than the 57 percent average since 1992, data from Thomson show.

Newell Rubbermaid Inc. and Comcast Corp. rallied on results that exceeded analysts' estimates.

Newell rose $2.11 to $27.72. The maker of Sharpie markers and Calphalon pans said first-quarter sales increased to $1.48 billion, beating the average analyst estimate of $1.41 billion in a Thomson survey. Newell boosted its 2006 profit forecast.

Comcast, the largest cable-television provider, said first- quarter profit jumped to 22 cents a share after the company signed up more customers for telephone service than it did all of last year. Analysts projected 14 cents, on average, in a Thomson survey. Comcast shares gained $1.25 to $30.45.

Spiders, QQQQs

S&P 500 shares, called Spiders, rallied 63 cents to $131.03. Nasdaq-100 tracking shares, known by their QQQQ symbol, added 40 cents to $42.26.

S&P 500 futures expiring in June climbed 6.00 to 1315.10 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures jumped 16.75 to 1727.50.

The Russell 2000 Index, a benchmark for companies with a median market value of about $670 million, slid 0.5 percent to 761.40. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, advanced 29.41, or 0.2 percent, to 13,235.29. Based on the changes in the Wilshire, the value of stocks increased by $36.8 billion.